Washington, DC, July 27, 2004--The 1,956 pages of proposed regulations
offer new details of how a prescription drug benefit will work when it takes
effect in 2006. The Bush administration marked another milestone Monday in its
Medicare reform law, releasing draft versions of the rules that will determine
exactly how a new prescription drug benefit will work when it takes effect Jan.
1, 2006.
Health and Human Services Secretary Tommy G. Thompson called the 1,956 pages of
proposed regulations "another giant step forward" in implementing the
Medicare reform law, which also uses billions of dollars in government funds to
expand the role of managed-care plans and maintain employer-provided retiree
health benefits.
The draft rules offered some new details about how the law will work but left
other questions unanswered. They did not, for example, define the 10 to 50
geographic regions in which private preferred-provider organizations and
standalone drug plans would operate, or specify exactly which prescription drugs
must be covered by private plans.
The proposed regulations, open to public comment for 60 days, are largely
intended to help potential participants in the program - private managed-care
plans, insurance companies, drug-benefit providers and large employers - shape
the final regulations and better understand how the program will work and what
they will need to do to win government contracts.
Those groups were quick to praise the regulations, saying they would help all
seniors save money on prescription drugs and encourage employers to continue
providing drug coverage to 12 million retirees ages 65 and older. Previous
analyses had predicted that the new benefit would lead employers to drop drug
coverage for 2.8 million to 3.8 million retirees.
Medicare administrator Mark B. McClellan said the regulations proposed Monday
would give employers new and "better, cheaper alternatives to
dropping" retiree drug coverage. Under the new law, employers would receive
a federal subsidy equal to 28% - from $611 to $940 for each covered retiree - of
eligible drug coverage costs.
If they choose to do so, Medicare recipients with no existing drug coverage can
sign up to participate in the new prescription drug program. Most seniors would
pay monthly premiums of about $35 and an annual deductible of $250. The benefit
would then cover 75% of drug costs up to $2,250; after that, seniors would pay
100% of their costs up to $3,600. Once total prescription expenditures reached
$5,100 annually, Medicare would pick up 95% of the tab.
Under options proposed Monday, employer and union programs either could meet the
Medicare standard or could offer drug coverage that improves on the standard
benefit. In either case, the programs would receive Medicare subsidies.
McClellan declined Monday to discuss how the subsidies might affect the number
of retirees who might lose coverage, saying only that the rules would increase
overall support for retiree drug coverage.
But Ron Pollack, executive director of the consumer group Families USA, said the
proposed regulations would allow employers who significantly reduce retiree drug
coverage to "receive big, new tax breaks. This will cost the taxpayers tens
of billions of dollars but will do very little to protect retirees," he
said.
The administration estimates that after seniors have paid about $420 in premiums
for the first year of the program, they would save an average of 53%, or $1,274,
of their annual drug bill.
The new law requires Medicare to provide drug benefits to 11 million
low-income beneficiaries. But the draft rules spell out for the first time how
the government will determine who among the low-income senior and disabled
Medicare recipients are eligible for the larger drug benefits.
McClellan said cash accounts and real estate holdings other than a primary
residence will be included in the asset test applied to 4.5 million low-income
seniors who are not poor enough to qualify for Medicaid. The value of family
heirlooms, "wedding rings, microwaves and cars" will not be included,
he said.
For poorer Americans, Medicare will cover an average 95% of drug costs for
beneficiaries with limited assets and incomes of less than $12,568 per
individual or $16,681 per couple. For seniors with assets of up to $10,000 per
individual or $20,000 per couple and slightly higher incomes - singles up to
$13,965 and couples up to $17,735 - Medicare will cover 85% of drug costs, on
average.
The law waives premiums and deductibles for the 6.4 million beneficiaries with
much lower incomes who qualify for the federal-state Medicaid program. They will
be required only to make co-payments of as little as $1 or $3 for each
prescription.
A sharply divided Congress passed the law late last year, but the political and
legal wrangling over the measure has only intensified since then. An independent
government investigation concluded that the Bush administration's video news
releases about the Medicare law violated federal rules on the use of taxpayer
funds for "covert propaganda." The taped segments were written as news
reports, and the source of the material was not readily apparent to television
news directors.
More recently, an internal HHS probe confirmed that the administration had
refused to provide Congress with information showing that the legislation could
cost as much as $535 billion over 10 years, instead of the public $400-billion
price tag, but said its actions were legal.
Democrats, including presumptive presidential nominee Sen. John F. Kerry of
Massachusetts, have sharply criticized the law, saying that it helps HMOs and
drug companies more than Medicare's 41 million senior and disabled
beneficiaries.
In addition, the Medicare discount card, which is intended to help seniors with
drug costs until the formal benefit kicks in, has gotten off to a rocky start.
Fewer than 1 million beneficiaries have signed up for the card; 3 million to 4
million more have been signed up through their Medicare managed-care plans.